Looking for a better price on Berkshire Hathaway? Here’s why you shouldn’t

Wall Street icon Warren Buffett was trained by an icon of the previous generation, Benjamin Graham. One of Graham’s most important concepts was not about picking stocks, but about managing emotions. Essentially, he explained that you are often your own worst enemy. This is something to think about if you’ve been thinking about buying shares of a company run by Warren Buffett. Berkshire Hathaway (BRK.A) (BRK.B -0.89%). That’s why buying now may be your best bet.

Warren Buffett warns investors

Although Warren Buffett doesn’t like to talk too much about his investing thoughts, there is one place where he is surprisingly candid: Berkshire Hathaway’s annual report. Reading the annual reports he wrote over decades is probably more valuable than reading most books on how to invest.

In his 2023 report, Buffett made a startling admission: “Overall, we have No The reason for this, he says, is that Berkshire Hathaway is so big (its market capitalization is $980 billion) that very few companies it could acquire would get off the ground.

This suggests that even Buffett thinks now may not be the right time to buy Berkshire Hathaway stock. If so, shouldn’t you take the advice of the man dubbed the Oracle of Omaha? Maybe not.

What is Berkshire Hathaway?

At its core, Berkshire Hathaway is a giant, sprawling conglomerate. It’s filled with many companies that Buffett bought or invested in because they met his investment criteria. Simply put, he prefers good companies trading at attractive prices. By purchasing them, he allows managers to manage them so that Berkshire Hathaway can benefit from the long-term growth of the business. He intervenes only when absolutely necessary. This makes Berkshire Hathaway something of a mutual fund. And what you’re buying when you add a stock to your portfolio is actually access to Warren Buffett.

So, what Warren Buffett is really telling investors is that there is no chance of “amazing results” given the high market valuations today. It probably has more to do with what Buffett can find to buy (remember, companies need to be well run and attractively priced) rather than the size of the company he runs. What does Buffett do about it? He sells shares to raise money. This can be seen as preparation for the time when valuations become more attractive.

When will valuations become more attractive? Perhaps during the next bear market. Buffett has a long history of investing while others are scared. If he sees a good company that is trading at an attractive price, he will step in and buy it, even if most investors are too scared.

This is why buying Berkshire Hathaway today, even though it is expensive (as Buffett himself hints), may be a good decision. Berkshire Hathaway will likely look cheap during a bear market when you have to overcome the heavy emotion of fear to add it to your portfolio. So when you’re least likely to make a purchase, it’s probably the best time to buy. This will also likely happen as Berkshire Hathaway seeks investments that will help take its own business growth to a higher level.

BRK.A data from YCharts

If you want to own Berkshire Hathaway so you can invest with investing legend Warren Buffett, you should probably just bite the bullet and buy the stock now. Even if you just buy a small starting position, it will help you overcome the emotional barrier that can cause you to pause and possibly miss an opportunity during a bear market. Adding more to a position you already hold is probably easier than opening a new position.

Graham was right, don’t let that stop you from benefiting from his student.

Benjamin Graham, often considered the father of securities analysis, was ahead of his time. Buffett benefited greatly from learning the craft of investing from him. You can also benefit from realizing that you are your own worst enemy when it comes to investing because emotions are very difficult to control. If you want to own Berkshire Hathaway, whose stock is trading near all-time highs today, you should at least consider buying a little now.